Order in (and out of) the house: what to do if an employee's behaviour damages your company's reputation

Order in (and out of) the house: what to do if an employee's behaviour damages your company's reputation

Here, here! Lord Sewel resigned following allegations involving drugs and prostitutes. But what if an employee in similar circumstances doesn't resign - can you dismiss?

What happened?

It's unlikely to have escaped your notice that Lord Sewel resigned after being filmed allegedly taking drugs with prostitutes. As the deputy speaker of the House of Lords and chairman of the Lords privileges and conduct committee many commentators believed his conduct was not only legally reprehensible but also in conflict with his position. His resignation, whilst not timely enough for some, was by all accounts the right decision. But what if he hadn't resigned? And what if an employee of yours does something outside of work that has the potential to, or actually does, damage your reputation? Can you dismiss?

What does the laws say?

There are five potentially fair reasons for dismissal under section 98 of the Employment Rights Act 1996, one of which is 'some other substantial reason' (SOSR).

SOSR is often referred to as a 'catch-all' reason for dismissal and the term is not defined by statute, nor is there any statutory guidance on what situations it covers. It therefore offers a degree of flexibility to employers in circumstances not caught by other potentially fair reasons such as conduct or capability. Case law does make clear, however, that the reason must be substantial - the interpretation of what is (or isn't) substantial is subjective and will depend on the facts of a particular case.

What can you do?

It has been held by the courts that where an employee acts in a way that damages (or poses a genuine risk to) their employer's reputation, dismissal for SOSR can be fair - even if the employee's conduct is not proven, although an employer should take a 'critical approach' to the evidence it receives. However, it is clear from the authorities that the employer must be able to provide evidence that reputational damage has actually been caused (or is highly likely to be caused) by the employee's actions. It will not be enough for an employer to engage in speculation that an employee's actions might or could damage its reputation.

Clearly, Lord Sewel's actions actually damaged the reputation of the House of Lords. But not every employee's actions outside of work will attract such media interest and resultant publicity. It is not, however, necessary for the damage to be to such a degree. It may be that the company has been linked to or becomes aware of an employee's questionable or criminal behaviour outside of work. Case law provides some helpful pointers on reputational dismissals:

A senior official in a public authority (which had responsibility for child protection) was dismissed when the Metropolitan Police Child Abuse Investigation Command contacted the authority and made a number of allegations against the employee.

Dismissal held to be fair on the basis of 'significant risk of reputational damage'.

In a similar case a school caretaker was dismissed after the police informed the school about historical allegations of sexual abuse (before he started work at the school and not involving children at the school) but before the police investigation had concluded. He was dismissed due to a 'safeguarding risk'; a breakdown in trust and confidence; and because the confidence that parents and the public had in the school could be seriously damaged.

Dismissal held to be unfair. A decision to dismiss because of an unproven allegation of abuse may be fair but is not inevitable. In this case the police had decided, before the dismissal took placed, not to prosecute and they would not give a view on whether the caretaker posed a risk. A final nail in the coffin for the school was that they had not followed a fair procedure which would have included giving the caretaker an opportunity to respond to the allegations.

Employer relied on an employee's wife's conviction for dishonesty as the reason for dismissing for SOSR.

Dismissal held to be unfair. Whilst it was accepted that this could amount to SOSR, if the wife's conduct had genuinely led to the employer's customers losing confidence in the employee, the employer had no evidence to support the fact that its customers felt this way.

Summary

To answer the initial question posed: you can dismiss for reputational damage (actual or potential) but you should bear in mind the following before doing so:

Always follow a fair process in dismissing (including allowing the employee the opportunity to answer the allegations)

Carry out a reasonable investigation to ensure that you have evidence to substantiate any actual, or the likelihood of potential, damage to your company's reputation

It is also advisable to list reputational damage (actual or potential) in your list of gross misconduct offences to allow you to plead misconduct or SOSR in the alternative

Disclaimer

This document is for informational purposes only and does not constitute legal advice. It is recommended that specific professional advice is sought before acting on any of the information given.